the escalating cost of higher education

a common conversation topic when i'm talking with my friends who have kids is the price of a college education these days, and whether we as parents are intending to cover any or all of that expense for our children (and, if we are planning on doing so, when to clue the kids in).

back when i graduated from the university of houston, about 15 years ago, tuition and fees for a full course load was less than $1,000 per semester for an in state student. i remember that figure, because i had a scholarship that paid that exact amount, and i would routinely get some spending or book money when my check came in. i just checked around, and the price is now closer to $3,000 per semester -- that's a decent chunk of change to have around, when you've got two kids that are going to overlap their college careers. and, that doesn't count room and board or other living expenses, which could easily double that figure. it wouldn't make much sense for my kids to go to the university of houston, though, unless they got some scholarship money there. with our rental properties in austin, it would be almost a no brainer that heading to the university of texas would be a better bet, as their housing would be set. but, what if they want to attend a school out of state? or an ivy league school?

i was able to live at home for part of my college life, which helped with expenses, and allowed me to be in the enviable position of not having to borrow any money in pursuit of my degree. after my freshman year, i decided to get a job and live on or nearer to campus with friends and have a more complete college experience. i juggled a pretty full load of school and work pretty much throughout my years at school, which i think helped prepare me for the "real world" in a way that many of my friends did not get to experience, while trading off some of the activities that my friends were able to participate in.

as parents, i think we all want to provide as much support and assistance as we can to our kids, and many times that comes with great sacrifice on our part. as i mentioned, i feel that my college experience allowed me to be better positioned for life after school, but i don't feel that is a lesson that i'd want to force on my kids.

we've already socked away enough for our three year old to handle a little more than year of tuition at the university of texas, and our one year old might just have enough to get through a semester at this point. i'd imagine, barring a drastic decline in their rates of return, that they'd have enough to get through an in-state public school, even with the trend of tuition increases that we've seen over the past years continue. and that's what we are prepared to do for them -- put them through a public university. of course, if they choose to go out of state or attend a private university, we'll let them make up the difference.

529 plans

well, it's time for me to open and start contributing to a 529 plan for the new addition to my family. after some deliberating, i've decided to go the savings route rather than the pre-paid. the 529 college savings plan allows after-tax contributions into a savings vehicle that grows tax free when used for college. this is good stuff for something that i am going to have to pay for anyway.

there are also pre-paid tuition plans covered under the 529 tax code, but i feel that they are more rigid and limit your choices down the road.

in researching this, i found a great comparison tool that helped me out to arrive at the utah 529 plan (you don't have to live in the state to sign up, in most cases) -- it's got a low expense ratio index fund that i'm going to go with.